Litigation and Dispute Resolution

Initial Action Pty Ltd v Woollahra Municipal Council – A refresher course in written requests for variation of development standards

14 October, 2018

It is well established that what is commonly referred to as “without prejudice” privilege is not limited to protecting offers of settlement per se. Communications between parties that are genuinely aimed at resolving a dispute will also be protected, that is, they will not be admissible in evidence. In New South Wales, without prejudice privilege is provided for in section 131 of the Evidence Act 1995 (NSW) (“the Act”).

There is however a number of recognised exceptions to without prejudice privilege, both at common law and contained in section 131(2) of the Act. In Unilever plc v The Procter & Gamble Co. [2000] 1 WLR 2436 at 2444, Walker LJ referred to one exception as follows:

“… One party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other “unambiguous impropriety” … But this court has … warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion.”

This has been referred to as the “unambiguous impropriety” exception to without prejudice privilege. Not surprisingly, it has rarely arisen in the case law. The Federal Court of Australia decision of Dataquest (Australia) v Dataquest Inc [1996] FCA 1685 provides one example.

Approximately 7 days after the applicant commenced proceedings against the respondents (for, amongst other things, alleged misuse of the applicant’s confidential information), a letter was sent by the solicitors for the applicant offering a compromise if certain moneys were paid. The letter stated that the applicant would undertake not to issue a media release enclosed with the letter, relating to the statement of claim filed by the applicant and the allegations contained therein, in order to enable instructions to be obtained regarding the offer. The respondents filed a notice of motion to restrain the applicant from issuing the media release. The judge (Tamberlin J) commented that although the settlement offer letter was marked “without prejudice”, he considered it necessary to consider the contents “because the basic contention is that the letter evidences an abuse of process or could arguably amount to a contempt of court by bringing undue pressure to bear on the respondents to settle the proceeding”.

The Court found that the language of the proposed media release was “fair and temperate” and no case had been made out as to it being in contempt of court, defamatory, or otherwise unlawful. It concluded that:

“In all negotiation there is an element of bargaining and leverage which takes place. In the present case, I do not consider that reference to the proposed media release can be said in any way to amount to unfair or improper bargaining”.

Ferster v Ferster [2016] EWCA Civ 717

In July 2016 the England and Wales Court of Appeal (Civil Division) delivered a judgment which provides an example of a case falling on the other side of the line, that is, of the Court not countenancing a communication expressed to be “without prejudice” to be a cloak for “unambiguous impropriety”.

Two sets of “hotly contested” proceedings were on foot. Interactive Technology Corporation (“the company”) at the instigation of Stuart Ferster and Warren Ferster were suing a number of defendants including their brother Jonathon Ferster for, amongst other things, breach of fiduciary duty in the management of the company. Jonathon brought proceedings claiming that the manner in which the affairs of the company were being conducted were unfairly prejudicial to the interests of the members or some of them, including Jonathon.

In the course of the proceedings Jonathan had made disclosure of his assets pursuant to a court order. Mediation took place during which Stuart and Warren had offered to sell their shares in the company to Jonathan for a specified sum. No agreement was reached. Following the mediation, Stuart and Warren made a revised offer to sell their shares to Jonathon as part of a global compromise of the two sets of proceedings. The offer included the following messages (which were conveyed by email from the mediator):

• Stuart and Warren had increased their offer because they had become aware of further wrongdoings by Jonathan. Jonathan knew the extent of his wrongdoings and Stuart and Warren believed that Jonathan was in very serious trouble which would also have serious implications for Jonathan’s partner by reason of Jonathan’s actions.

• Stuart and Warren had information that Jonathan did not only hold bank accounts in England (as per his affirmation) but also that various additional offshore accounts were held by him or on his behalf (by his partner).

• Mr Watts (the partner dealing with the matter on behalf of Jonathan) was expected to take his client’s instructions as a matter of urgency as a settlement would obviate the need of further steps such as committal proceedings being issued.

• If Jonathan had sworn false evidence Mr Watts would be aware that Jonathan would face charges of perjury, perverting the course of justice and contempt of court and was likely to be imprisoned. If Jonathan’s partner was implicated he would likewise be investigated and/or charged.

• In the above circumstances, Jonathan’s credibility and reputation would be destroyed. He will also have no prospect of succeeding in this case.

Jonathon sought to amend his petition to refer to the contents of the above email (with proposed settlement figures redacted). The judge held that the contents of the email showed that it fell within the “unambiguous impropriety” exception to that privilege, and thus was available for use in the proceedings brought by Jonathon. Stuart and Warren appealed to the England and Wales Court of Appeal (Civil Division) from the judge’s ruling.

Counsel for Stuart and Warren submitted amongst other things that the judge erred in stating that the increase in price in his clients’ revised offer to Jonathon had nothing to do with any increase in the value of the shares or of the company’s business. Counsel distinguished between demanding more money than a claim is worth, and demanding an increased sum which still remained a discount compared to what the claim is worth. He submitted that the present case was a case in the latter category whereas the judge had treated it as one in the former category.

The Court of Appeal rejected this submission on the basis that it would have been entirely possible for Stuart and Warren to make an increased offer for the sale of their shares by reference to what they regarded as their increased value (once the contents of the undisclosed bank account had been allowed for), or because of what they perceived to be the increased prospects of the company succeeding in its action. On a fair reading of the email that was, however, not the offer which they chose to make. The Court of Appeal said that:

“In the end … what is involved here is an evaluation of whether the threats unambiguously exceeded what was “permissible in settlement of hard fought commercial litigation”.

The Court of Appeal concluded that it agreed with the judge that the threats here did amount to “unambiguous impropriety”, and thus were admissible in the litigation, essentially for the reasons the judge gave which included:

  1. The threats went far beyond what was reasonable in pursuit of civil proceedings, by making the threat of criminal action (not limited to civil contempt proceedings).
  2. The threats were of immediate publicity being given to allegations of extreme severity against Jonathan and his partner within a short timescale. This placed quite improper pressure on Jonathan.
  3. There was no attempt to make any connection between the alleged wrong and the increased demand.

Take home points

• The Courts recognise that litigation is often hard fought and emotions are often high. There is also a strong public policy in parties being encouraged to settle their disputes out of Court and, to that end, being able to negotiate and exchange their positions frankly and without fear that anything said may be used against them. However, reasonable bounds still apply.

• In particular, conduct which crosses the line of “unambiguous impropriety” provides a recognised exception to without prejudice privilege. Exerting unfair pressure on the other party to accept an offer, or statements made not with a view to seeking compromise but rather in the nature of an ultimatum to the other side, may depending upon the circumstances meet this test of “unambiguous impropriety”.

• Conduct on a without prejudice basis which amounts to “unambiguous property” could even (depending upon the circumstances) give rise to a charge of contempt of court or even the criminal offence of blackmail.

• Practitioners and clients need to be cognisant of the above matters and in particular need to be aware that without prejudice privilege is not absolute and has a number of exceptions, not limited to the one discussed in this article.

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Litigation and Dispute Resolution

Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
29 August, 2023

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty.  The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.

Published by Leighton Hawkes
18 August, 2023
Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.

Published by Justin Pennay
10 August, 2023